Buying a franchise: checking mandatory purchasing requirements

Choosing a franchise network is not just about brand recognition. It also depends on what you are required to buy, from whom and on what terms. Mandatory purchasing requirements can ensure consistent quality, but they directly affect profit margins and day-to-day operations. Before choosing a network, assess them as a separate part of the investment, not as a minor detail in the operations manual.

1. Map out exactly what you must buy

Ask for a written schedule covering every category of mandatory purchases: goods for resale, raw materials, packaging, consumables, equipment and services linked to procurement. For each category, it should be clear whether you must buy exclusively from the franchisor, from a specified third party or from any supplier meeting approved specifications.

Distinguish between an obligation to meet specifications and an obligation to buy from a single supplier. They are not the same. Ask what purpose each restriction serves: protecting a recipe, ensuring product safety, maintaining a consistent appearance or something else.

Also check whether the list can be changed unilaterally through the operations manual. Ask for clarity on notice of changes, how existing stock will be handled and the cost of replacing equipment. Blanket acceptance of ‘all future specifications’ may create costs that are not apparent in the initial offer.

2. Calculate the true delivered cost

Do not assess an offer on unit price alone. Ask for recent price lists and sample invoices or other supporting documents, with confidential details redacted where necessary. The aim is to calculate the actual cost of each usable unit by the time it reaches your premises.

Include the following in your calculation:

• transport, insurance and any cold-chain charges;
• minimum order quantities and mandatory pack sizes;
• discounts, credits and the conditions attached to them;
• wastage, expired stock and non-returnable products;
• payment terms and late-payment charges.

For premises on an island or in a remote area, request a delivery quote for the specific address. A general transport estimate is not enough. Compare prices on the same tax basis, asking your accountant to distinguish the underlying cost from the cash-flow impact of VAT.

Also ask whether the franchisor receives discounts or other benefits from approved suppliers, and whether any of these are passed on to franchisees. Do not assume you are automatically entitled to a share: this needs to be expressly provided for in the contract.

3. Agree what happens when supply fails

Exclusive purchasing creates operational dependence. The contract therefore needs a procedure for shortages, delays and defective products, not just an obligation on the franchisee to place orders.

Ask for standard delivery lead times, the way shortages will be notified and the returns or credit procedure to be specified. For perishable products, consider agreeing a minimum remaining shelf life on delivery. Clarify who pays return costs and how any failure to meet quality standards should be documented.

Alternative sourcing must not be left as a verbal promise. Negotiate a process for temporarily approving another supplier, with objective specifications and a clear deadline for a response. Do not assume you can unilaterally bypass the agreement when a shortage occurs.

Also discuss who organises a product recall and who is contractually responsible for the associated costs. Allocating costs between the parties does not remove either business’s statutory product safety obligations.

4. Check the restrictions under Greek law

Greece has no dedicated law comprehensively regulating franchising, nor a specific mandatory, standardised pre-contractual disclosure document. The general provisions of the Greek Civil Code apply, among other rules. Articles 197 and 198 concern good faith in negotiations and liability for harm culpably caused during that stage.

The European Code of Ethics for Franchising provides for full and accurate written pre-contractual disclosure within a reasonable time. It is a self-regulatory framework, not a generally applicable Greek law. Check whether the franchisor is bound by it through association membership or the contract.

Exclusive purchasing arrangements are also assessed under Greek Law 3959/2011 and, where its conditions are met, Article 101 of the Treaty on the Functioning of the European Union. Regulation (EU) 2022/720 on the block exemption for certain vertical agreements is also relevant.

Mandatory purchasing is not automatically unlawful. Equally, not every restriction is lawful simply because it appears in a franchise agreement. Ask a lawyer to assess its scope, duration, economic function and the conditions for exemption. Falling outside the block exemption does not, in itself, make an arrangement unlawful.

5. Put the answers into a contractual schedule

Record what has been agreed in a purchasing schedule: products, suppliers, the price adjustment mechanism, deliveries, returns and alternative arrangements. Specify which document takes precedence if the contract, operations manual and commercial offer differ.

Before deciding, ask existing franchisees for practical information on delivery reliability and complaint handling, without exchanging sensitive information about future business plans.

Practical takeaway: choose a network when you can establish not only the purchase price, but also the rules for changing it, the standard of delivery service and the solution if supplies run short.